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One in five new borrowers fix home loans

First home buyers are locking in more fixed rate home loans than they were four years ago as arrears rates continue to improve.

Australia's largest mortgage broker, Australian Finance Group (AFG) says demand for fixed three-year loans reached a four year high in September, with 21.5 per cent of new borrowers choosing to lock in a mortgage rate.

"The last time that fixed rate loans were so popular was in March 2008 when 24 per cent of borrowers chose to lock in rates," AFG said in a statement.

It comes after the Reserve Bank of Australia (RBA) cut the cash rate by a quarter of a percentage point to 3.25 per cent yesterday, a move which has largely been welcomed by the housing industry.

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The AFG survey found loan to value ratios rose from 66.9 per cent in June to 69 per cent in September, reflecting an increase of first home buyers in the market who tend to borrow more.

While there were some areas of confidence in the mortgage industry, things were generally still patchy.

It came as ratings agency Moody's released a report showing Australian prime mortgage arrears improved in July compared to the previous month.

Arrears in excess of 30 days in the Australian prime residential mortgage market were 1.61 per cent in July, down from 1.66 per cent in June and 1.64 per cent in July 2011.

Moody's believes the rate of arrears will hold steady in 2012 because of recent interest rate cuts and expectations that GDP growth will remain at 3.8 per cent.

Ratings agency Fitch also expects Australian mortgage performance to improve in the third and fourth quarters of 2012.

Delinquencies in the Australian prime residential mortgage backed securities (RMBS) sector decreased to 1.54 per cent in the second quarter from 1.6 per cent in the first quarter.

Fitch said the improvement in arrears was most evident in the 30 to 59 days and 60 to 89 days category.